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3 Things Your CEO Wants to Know

A lot of people who move up through an IT organization are surprised to find that the higher in the IT organization they get, the less the job is about technology. At the very top of the IT organization in the CIO role, the focus isn’t on IT at all – it’s on doing the best thing for the business. In fact, Peter Whatnell, CIO of Sunoco and 2009 President of SIM International, recently said that most CEOs just want the CIO to provide answers to three questions:

  1. Where do we need to invest?
  2. How do we stand versus competition?
  3. How do we mitigate risk?

If you think about it, these are three very good questions for an IT organization, yet none of the questions is technical, and none of the questions requires a technical answer. Let’s look at each of the three questions in more detail:

1. Where do we need to invest?
The key word here is “invest.” That’s because business executives consider IT an investment – an investment in greater revenue, increased profits, higher customer satisfaction, and other things that have benefit to the business. For something to be a good investment, it has to provide positive results that exceed the cost of making the investment, and that’s true for IT as much as it’s true for any financial investment. So don’t bother to propose a project for which there’s no clear business benefit. What’s the point in investing if there’s no return?

2. How do we stand versus competition?
It would be nice to envision a CEO as having lofty visions of the future which don’t require consideration of the competition. But that’s unrealistic; the world tends to compare companies that have similar products and services, and investors in a company’s stock certainly look at competing alternatives.

While it’s easy to compare revenue and profit numbers for competitors, it’s more difficult to compare Information Technology. You have to examine the processes used for each major aspect of the business, look at the efficiency and effectiveness of the processes, and then drill down to the underlying systems and technologies being used for each process.

If a particular business process being used by a competitor is more efficient or effective than the equivalent process in your own company, then your company is at a disadvantage. If you net out the comparison of your processes to the equivalent competitor processes, and the competitor ends up ahead of the game, then there’s potential cause for action, and it may be time to invest in the improvement of your own processes and systems. But don’t just copy your competitors; try to do something that’s better. Your competitors certainly won’t sit still and leave things as they are.

And if your processes are better than all of your competitor’s processes, then broaden your definition of “competitor.” Look at companies that have a similar process to one of your processes, even if that company doesn’t offer competing products and services. For example, L.L.Bean was at one point regarded as the leader in order fulfillment (they may still be the leader; I haven’t kept up). Even if your company doesn’t compete with L.L.Bean, if you have an order fulfillment process in your company then you might want to benchmark your processes against L.L.Bean’s and see if you can learn something about how to improve your own order fulfillment process.

3. How do we mitigate risk?
There are two important things to notice in this question. First, there’s no qualifying adjective in front of the word “risk.” We’re not talking about IT risk here; we’re talking about risk in general. So this is more than just the question “How do we mitigate information technology risk?” It includes that, of course, but it also includes the question “How do we use technology to mitigate business risk?” It’s important for CIOs to look at both of these issues: how to mitigate IT risk as well as new ways that IT can be applied in the business to mitigate overall business risk. Here’s an example of the difference. You can mitigate some IT risk by having redundant servers in multiple locations. You can mitigate some business risk by figuring out a way to reduce the impact of high fuel prices on your company by implementing a system to optimize truck routes or to reduce travel by using videoconferencing.

The second important thing to notice in the question is the use of the word “mitigate” which means “to lessen the impact or intensity of.” No sane executive expects to eliminate risk, since risk is a part of the world in which we live. We take steps to minimize risk where it’s appropriate, but it gets expensive to reduce risk beyond a certain point of diminishing returns. Business executives take a two-step approach to risk: reduce risk where it’s cost effective, and then mitigate the remaining risk to the extent possible.

Conclusion
Wise executives know that CIOs will do everything possible to manage their IT resources wisely. It’s expected that this management will take time out of a CIO’s busy day, but this day-to-day IT management role is just a basic part of the job, taken for granted like breathing, eating and sleeping. Where the CIO really contributes to the business is in the added value that IT brings to the table beyond the day-to-day. Peter Whatnell’s three questions get to the heart of that contribution.

How would you answer the three questions for your CEO? Or are you too busy working on the day-to-day stuff to be able to answer them?

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